Method, apparatus and system for financial planning incorporating calculated health costs based on actual claims and the actual cost thereof

ABSTRACT

A financial management tool that includes calculated health care costs and health-based longevity to provide information to retirees to be able to calculate the amount of money that needs to be saved to cover retirement expenditures is provided with actual claims and actual related cost data from a database to increase the cost projection reliability of the tool.

FIELD OF THE INVENTION

This invention relates to financial planning tools and more particularlyto the incorporation of calculated health costs based on actual claimsand the actual costs of resolving these claims.

BACKGROUND OF THE INVENTION

Since healthcare is one of the most expensive cost items thatindividuals face in retirement it is important to be aware of thesecosts and to be able to project them with a high degree of certainty.Retirement studies have shown that healthcare costs are approximately33% of all expenditures of individuals over the age of 60. Thesehealthcare costs vary with respect to the state in which one will livein retirement, the individual's expected income level and other factorsthat are related to the individual. It is therefore important during theprediction of how to allocate resources in retirement that one does notjust rely on a verbal survey to calculate what is required in retirementbut rather than picking an arbitrary healthcare cost number there is anecessity for establishing healthcare cost numbers that more accuratelyreflect what will happen to the particular individual in retirementbased on age, gender, health conditions, expected state of residence andincome since Medicare is means tested.

As will be seen the subject invention relies on actual claims data andactual costs for resolving these claims upon which and healthcare costsas projected. This means that projections are based on actual claimsdata, meaning data that reflects actual claims and data that reflectsthe actual cost of resolving the claims.

It is noted that there are many companies in the United States thatattempt to project health costs by conducting surveys with consumers,asking their opinions about what they plan to do in retirement whiletaking into account their own personal healthcare expenses.

The companies which conduct these surveys utilize sample sizes on theorder of 1,000 to 2,000 people and they are almost instantaneouslyout-of-date because the information is pertinent to the specific periodof time at which it was collected. The result historically is that theinformation regarding retirement planning from companies in thehealthcare space are based on this survey-based data.

Typically in these surveys a sample of individuals are surveyed whotypically are people who will be retiring in the next 5 to 10 years.Financial planning institutions collect the attitudes of the surveyedindividuals in order to form the foundation from which the institutioncan project costs. It is noted that these surveys are based on whatindividuals perceive and are not based on anything having to do withactual behavior or actual costs. Typically the surveys are conductedon-line with a random set of on-line individuals, typically over the ageof 55. The individuals are asked a set of questions, with the answerscollected and published to be able to project healthcare cost estimatesor averages from the survey-based information.

There is another survey-based population in which surveys are conductedby the Center for Disease Control (CDC). These surveys have surveypopulations based on groups of people having particular chronic diseasessuch as cancer or cardiovascular disease. The data available from theCDC is a combination of observations based on health conditions appendedto the reported attitudes of the people surveyed. The data from the CDCis valuable because the CDC knows about the various chronic conditionsso that the CDC can make generalizations about the attitudes andbehaviors of selected populations.

From the point of view of a statistician and a notion of valid samplesizes, when one wishes to give financial advice to an individualregarding his or her healthcare cost and try to project into the futurewhat the individual's healthcare costs will be it is absolutelyimperative that one has a valid sample size that reflects theindividual's profile. Thus, for example, for a man who is age 50 and hastype II diabetes and who plans to live in Florida in his retirement,when one tries to assemble data related to these combinations togetherwith the relevant populations for each of these profiles the availablesample size is miniscule.

Thus, in order to validate the outcome for that individual given thecombinations in his or her profile one needs to have a valid cell behindthe projections of actual behavior. No such cell currently exists.

In the United States there is currently one independent calculation ofactuarial data in which claims data is collected across all of thehealth insurers. That data of for instance involves 50 million recordsper year to populate a very extensive database from which one can derivealgorithms to actuarially project healthcare costs that arestatistically reliable for an individual for a wide number of thesecombinations of circumstances. If one could obtain claims data and thereal cost of resolving these claims one could form a very solid andaccurate, precise estimate of what the individual's healthcare costswill be on an annual basis.

Thus, in the past what surveys exist are based on 1,000 to 4,000 peopleper year and one cannot analyze that population down to the finite levelrequired for statistically reliable healthcare data for an individual.

One healthcare related financial management tool for which accuratehealthcare cost data is required is described in U.S. patent applicationSer. No. 12/655,591 filed Jan. 4, 2010, incorporated herein byreference. It is to this financial tool that it is critically importantto bring statistically accurate and viable healthcare costs andstatistics.

Up to the present time there has been no complete database for financialhealthcare tools that are statistically robust enough to providemeaningful financial advice, primarily because what tools that do existdo not incorporate actual claims data and actual costs of resolvingthese claims.

By way of further background, financial services available from a largenumber of companies include comprehensive planning tools that aidindividuals in planning for retirement. These comprehensive planningtools such as those available from Zywave's Naviplan provide anindividual with ways of planning for the individual's retirement basedon the individual's personal financial profile. Typically thesecomprehensive planning tools take into account contributing factors,such as fixed and variable living expenses such as mortgage, food,utilities, clothing, vacation expenses, charity donations, and taxes.Typically these tools specify a retirement date and project availablefunds by taking into account various income sources as well as expensesthroughout the retirement period.

These comprehensive tools may factor in retirement income generated fromsources such as savings, Social Security, a pension, veterans benefitsas well as employment during retirement.

All of these comprehensive tools project available cash or income whilemaking adjustments for variables such as inflation and the rate ofreturn, allowing an investment counselor to determine the financialstatus of their client

The problem with such comprehensive planning tools is that they fail totake into account out of pocket health care costs and actuarially basedexpected longevity derived from a personal health profile for eachindividual. Up until the present time, there has been no way ofcalculating an investors future out of pocket health care costs based ona customized personal medical profile and expected lifespan. As medicalexpenses will be the single largest expense Americans will face inretirement, it is critically important that financial planners have anaccurate and consistent means of incorporating health care expenses andlife span into the retirement planning process. Moreover, traditionalretirement planning tools do not incorporate longevity statistics basedon the health of the individual.

It is noted above that the cost of heath care is the single largestfinancial burden faced in retirement. Over the last few decades healthcare costs have risen two to three times faster than inflation. Lookingforward, the cost of medical care is projected to increase by as much as15% annually. As a result, a 65 year old healthy female living to anactuarial calculated life expectancy of 89 will incur retirementhealthcare expenses of $280,000 should she fall in the lowest incomebracket to over $500,000 if she enters the highest income bracket.

In addition, the actual health care cost could even be higher if healthcare costs increase faster than projected. Moreover, if one becomes illor one lives beyond the average life expectancy, one might need to beprovided with nursing home care, where the average cost for a 65 yearold female needing skilled nursing care in the State of Ohio can expectan average stay of approximately 3 years at a future cost of of over$225,000 per year beginning at age 87.

With respect to commonly available insurance, it is noted that Medicarecovers only half of health care expenses, and private insurance is oftentoo costly and does not always address healthcare needs. These realitiesare causing forward looking consumers to assess the impact of healthcare expenses on their financial futures so that they can intelligentlyplan.

Thus, in the past there has not been a retirement planning tool thatincorporates into individual plans personalized actuarial basedlongevity, as well as a calculation of health care expenses based on thehealth of the individual.

In order to overcome the shortcomings described above, the financialmanagement tool described in the above noted patent application isprovided which in addition to the usual financial profiling alsoconsiders an individual's health in order to project their heath careexpenses during retirement. This tool also includes longevitycalculations based on the personal health profile of each individual.

It is noted that financial advisors arbitrarily project lifespan and inmany, if not the majority of cases, simply ignore health care expenses.As a result, there are health care expenses which are unaccounted forduring the planning process that affects an individual's retirement.

Note this tool involves a method of calculating personal health careexpenses and personalized longevity based on the particular medicalhistory of the individual. This permits taking into account projectedlifespan based on, amongst other things, health factors. Thus, if aperson has high blood pressure or cancer; or is a smoker, the subjectsystem projects a specific longevity as opposed to an average longevity.Moreover, these self-same considerations are utilized to project outannual health care costs during retirement. Additionally, the systemaccounts for accelerated healthcare expenses in the last two years oflife which can create a substantial financial burden for extended familymembers.

With these two calculated inputs one can utilize the availablecomprehensive planning tools, and the subject system, to provide acomprehensive program tailored to the individual and not at the grouplevel which is breaking new ground in the actuarial world.

In one embodiment, the system incorporates a questionnaire or profilingsystem that takes necessary items into account to calculate health carecosts and longevity. This is then plugged into a database, in which thecosts are broken down into different categories including Medicare PartA, Part B, Part D and Supplimental insurance premiums as well as otherout of pocket expenses including co-pays eye, ear and dental expenses.The database for the individual is also broken down into specificdisease states, such as heart disease, cancer, high blood pressure,cholesterol and the like. One embodiment of the system allowsinstitutions to select from a 10 to 25 question health carequestionnaire. This provides a report which calculates the projectedamount of money that one will need to save in the present in order tocover future out of pocket health care expenses during retirement, allbased on the individuals health history and expected lifespan. In oneembodiment, the system takes the future value of retirement expenses asof the first year of retirement and based on an expected return onsavings in retirement as well as the return on savings prior toretirement calculates how much the investor will be required to savetoday in order to cover future annual medical expenses in retirement.The system may output results in the net present value as well as futurevalue.

Also inputted into the program is the current age of the individual,their proposed retirement age, their calculated life expectancy, thehealth care inflation rate, the expected rate of return prior toretirement, and the expected rate of return during retirement. Theresult of the financial tool calculation is the amount needed to besaved in order to cover future expenses, including health care costs.

The system is flexible in that one can choose a particular rate ofreturn both prior to retirement and during retirement, and can thenenter different retirement dates and to see the difference in the ratesof return.

Obviously most individuals would not be as aggressive in theirinvestments during retirement as they are in a pre-retirement period.This can also be reflected in the calculation made by the subject tool.As an example, if one is looking at a growth portfolio on a compoundedbasis, one may be looking at a 7% rate of return prior to retirement,but for instance a 4% return during retirement.

The important point is that the individual is given the opportunity tochoose the rates of return and see what happens to the available funds.The calculation also enables one to project out what additional moneyneeds to be saved per month if one cannot come up with an initialinvestment.

In summary, the above financial management tool permits an individual toknow what are his or her costs going forward given a health-basedprediction of how long the individual is expected to live.

This tool thus informs the individual of his options, calculates healthcare costs in his retirement planning, and gives him health-basedlongevity information that enables the individual to develop acomprehensive retirement plan.

The above the contrary not withstanding calculations have been based onsurvey date and a database that has a limited sample size.

SUMMARY OF INVENTION

It is the purpose of the subject invention to utilize actual claims madeand the actual costs of resolving the claims as a basis for anyhealthcare related financial management tool. This invention relies onstatistics from actual claims based on reports from the majority ofhealth insurers. Moreover the database relies on current claims on thebooks of the health insurers and what the health insurers have to pay inresolving the claims. It is noted that the claims can be classified interms of disease and particular patient condition, with the claimscross-correlated against the associated healthcare costs when the claimis paid.

Because actual claims and actual costs are placed in the databases wherethe database is used by a financial management tool one can provide areliable healthcare cost estimate for use in retirement planning. Thereason for the statistical reliability and prognostication value is theexceptionally large sample size and the granularity by which the claimscan be analyzed. Moreover, this granularity can be correlated withassociated actual costs to provide an unusual degree of confidence inthe out put of the financial management tool that utilizes thisdatabase.

In summary, a financial management tool that includes calculated healthcare costs and health-based longevity to provide information to retireesto be able to calculate the amount of money that needs to be saved tocover retirement expenditures is provided with actual claims and actualrelated cost data from a database to increase the cost projectionreliability of the tool.

BRIEF DESCRIPTION OF THE DRAWINGS

These and other features of the subject invention will be betterunderstood in connection with the Detailed Description, in conjunctionwith the Drawings, of which:

FIG. 1 is a diagrammatic illustration of the subject financialmanagement tool utilizing health-based life expectancy and calculatedhealth care expense to provide a display of cost of living versusavailable assets;

FIG. 2 is a block diagram of the system of FIG. 1, in which the resultsof a health risk analysis questionnaire are provided to project healthcare costs and to provide health-based lifespan estimates;

FIG. 3 is a diagrammatic illustration of the health care questionnaireutilized in the subject invention, which incorporates basic informationabout the individual, lifestyle and medical history to provide a healthrisk analysis that results in a personalized health expense financialmanagement tool that calculates the savings or income needed to coverout-of-pocket costs during retirement;

FIG. 4 is a pie chart showing projected out-of-pocket health careexpenses broken up into dental, co-pays and premiums;

FIG. 5 is a graph showing expense growth over the course of retirementyears for dental, co-pays and premiums;

FIG. 6 is a graph showing the cost of waiting to enter into a retirementprogram based on current assets available versus costs in four years;

FIG. 7 is a bar chart showing estimated medical costs in retirement forboth the client and the client's partner over five year retirementperiods;

FIG. 8 is a diagrammatic illustration of the estimated medical costs inretirement, which compares savings needed to cover medical expenses inretirement versus actual medical expenses in retirement, showing theadvantage of early investing;

FIGS. 9A-9E are flow charts showing the operation of the subject system;FIG. 10 is a diagrammatic representation of the use of actual claims andactual associated costs in providing precise actuarial data to thecovered healthcare expense module of FIG. 1;

FIG. 11 is a flow chart of the actual claims and actual cost database ofFIG. 10 showing the generation of base healthcare cost number and thecost adjustment due to an individual's profile; and,

FIG. 12 is a healthcare centric chart for deriving an age appropriatehospital cost based on the actual claims and actual cost database ofFIG. 10.

DETAILED DESCRIPTION

Prior to describing the interaction of the actual claims, actual costdatabase with a financial healthcare centric financial tool are, thefollowing describes such tool.

Referring now to FIG. 1, a financial management tool 10 is provided withboth calculated health care expense 12 and health-based life expectancy14. This takes into account health-based information to assist infinancial management during retirement. Also, as an input to thefinancial management tool, is a selected retirement date 16 as well as afinancial planning input 18 that includes expected state of residence,expected income in retirement, current savings and current and futurerates of returns. Note that the financial management tool incorporates aprocessor for running algorithms that provides the calculationsnecessary for the subject invention including income and state ofresidency, as well as data storage.

The financial management tool 10 is coupled by a server 20 to a network22 that may include the internet or some wireless communicationsvehicle, with the input to the financial management tool being from aterminal 24 operated by an individual 26. Here terminal 24 has a display28 and enables input of relevant individual data in fields in the tool'sdata storage. The display of health-related information enables theindividual to plan for retirement.

As can be seen on display 28, there are a number of fields 30respectively relating to the age of the individual, the age that theindividual plans to retire, the calculated life expectancy of theindividual, the health care inflation rate, the expected rate of returnbefore retirement, and the respected rate of return during retirement.

As a result of the operation of the tool a calculation is made to as thesavings needed to cover the out-of-pocket medical expense portion of theexpenses associated with retirement.

What is shown in the graph to the right of the display are theout-of-pocket medical expenses per year in retirement based on theinformation that has been provided in the dialog boxes to the left.

Assuming that an amount of savings needed to cover out-of-pocket medicalexpenses in retirement for a person age 52 who plans to retire at 65 andhas a life expectancy of 88, what is displayed by columns 32 are thetotal required health care reserves. The shaded portions 34 show theannual out-of-pocket health care expenses. It is noted that the lifeexpectancy 36 is derived based on not only average actuarial tables, butalso actuarial tables taking into account the particular individual'shealth status.

As can be seen at age 65, in one example the amount of assets availableis $285,000. This sum is decreased by the total required health carecost, with the out-of-pocket health care expenses increasing during theretirement years. What can be clearly seen from this chart is that thehealth care reserves are completely depleted at the calculated date ofdeath.

Thus, the chart indicates that given all the health care informationincorporated into the calculation, at the time of death one hascompletely depleted ones health care reserves. This is based uponinitial savings, the health care inflation rate, and expected rate ofreturn before retirement and expected rate of return during retirement.

This tool can be exercised by the individual by selecting values of theindicated variables, for example to compare the financial implicationsof retiring at one age as opposed to another.

One can also evaluate ones financial situation by varying the rates ofreturn, both post-retirement and pre-retirement.

Referring to FIG. 2, financial management tool 10 has its financialplanning input from a financial portfolio 40 in which various investmentportfolio scenarios can be entered into tool 10.

Most important, with respect to this financial planning tool, are thehealth care based initiatives engendered by the completion of the healthrisk analysis questionnaire 42, which is used both to provideinformation about and to project health care costs as illustrated at 44,and to deliver a health-based life plan estimate 46. There is anactuarial input 48 to enable the projected health care costs to becalculated at 52, as well as an actuarial input 50 to be able to providefor a health-based life span estimate.

The projected health care costs are the health care expenses calculatedat 52, whereas the health-based life span estimate 46 is utilized topopulate a module 54 that defines the retirement start date and the lifeexpectancy of the individual.

As shown, a health care based financial results report 60 is supplied toa display or printer 62 from which health care based financial reportscan be viewed as illustrated at 64.

Key to the financial management tool is the health care questionnaireshown in FIG. 3, designated by reference character 70. Here the healthcare questionnaire 72 incorporates basic information such as age, sex,marital status, race, height, weight and answers to types of retirementplans and retirement benefits. The questionnaire also includes alifestyles portion 74 that incorporates the result of physical exams,tobacco usage, alcohol consumption, physical activity, and diet andnutrition.

The questionnaire also includes a medical history section 76 thatincludes medical indicators, such as type 2 diabetes, cancer,cardiovascular disease, blood pressure, and cholesterol numbers.

The result of the questionnaire is applied to a health care riskanalysis module 80 that includes a health profile 82 generated fromquestionnaire 70, as well as a health risk score 84.

The health risk analysis creates the financial implications 84 so as toprovide entry into a financial plan for instance out-of-pocket healthcare expenses.

Module 80 having calculated the various financial implications outputs apersonalized health expenses report 90, which includes a personalprofile 92, the savings needed to cover medical expenses in retirement94, and the estimated medical costs in retirement 96. These implicationsare contained in a final financial scenario report 98.

It is thus important for the individual planning for retirement to beable to know what amount to set aside for retirement by taking intoaccount not only the usual financial analysis tool outputs, but alsomodification of these outputs that account the health of the individual.

Referring to FIG. 4 as can be seen from the pie chart, typical projectedout-of-pocket health care expenses are 69% due to premiums, 25% due toco-pays, deductibles and all other expenses, and about 6% due to dentalcosts.

Referring to FIG. 5, these projected health care expenses grow over thecourse of retirement years. For example, the combined dental, co-pay andpremium cost at for instance age 60 of $150,000 balloons to over$300,000 if the individual lives to the age of 90.

Another useful output of the financial management tool is calculatingthe cost effect of waiting for retirement. As can be seen by the graphin FIG. 6, assuming that one has a current health care cost of $140,000,it can be seen through the use of the subject tool that waiting for 4years to begin retirement would result in an overall cost increase ofapproximately $250,000, showing that delay in retirement planning isindeed costly.

Referring to FIG. 7, one of the interesting outputs of the financialmanagement tool is the ability to provide a visual output of theestimated medical costs in retirement over five year increments and toshow the increase in estimated medical costs for either an individual ortheir partner. Here the estimated medical costs in retirement can becomputed on a five year interval based on a combined input from theclient and the client's partner. Note, if the client dies at 90 years ofage, the client's partner's estimated costs are shown for the followingfour years.

Referring now to FIG. 8, shown are two bar graphs that indicate thesavings needed to cover medical expenses in retirement, for instance$216,261 for an individual versus the medical expenses in retirement,which are calculated to total $397,587.

This indicates that early investing is needed to offset the totalmedical expenses in retirement, which typically exceed the savingsnecessary to cover these expenses.

In summary, what is provided by the financial management tool is anindividualized report that calculates the necessary savings needed tocover medical expenses during one's retirement years. Since thesemedical expenses are the most significant expense during retirement,providing an individual with a calculation of the savings they candetermine when to retire and what assets or savings would be required tocover their health care expenses.

What follows are examples of how an individual can benefit from the useof the subject financial management tool.

Example I

As mentioned above, the primary use of the financial management tool isto determine how much money one will need to have saved at the point ofretirement. Based on the retirement date and the expected return onsavings and retirement, the financial management tool calculates howmuch savings must be accumulated in order to cover annual medicalexpenses.

For instance, a particular individual may need $120,000 in savings tocover $120,000 in health care expense. Note that the health care expenseis growing at about 5% annually. Assuming $120,000 in savings isrequired at the point of retirement, the system can calculate fromtoday's date until the retirement date what one would need to save. Forinstance, one would need $38,000 in the present in order to have$120,000 at the point of retirement to cover the medical expenses.

Since medical expenses are the largest expense during retirement, it isnot an expense that can be diminished by living in a smaller house orbuying a less expensive car. One does not have these options with healthcare. Thus, the numbers that are going to have to be addressed are theactual projections based on the individual's health and status.

Example II

Another feature as mentioned before is that if a person needs $38,000 insavings today in order to have access to $120,000 at retirement, thefinancial management tool will inform the individual that if they haveonly $20,000 today, the subject tool will suggest they add an additional$32 per month to reach their goal.

Example III

As noted above, one can choose rates of return and can run “what if”scenarios. For instance, the system can reflect the various financialimplications of retiring at 65 years of age or at 67 years of age. Thetool can be adjusted to various retirement dates and also on differentrates of return during retirement.

If, for instance, one is involved in a growth portfolio on a compoundedbasis, the individual may be looking at 7% growth. However, duringretirement assuming the portfolio is more conservative and goes topurchasing of treasuries, perhaps a 4% rate of return is a morereasonable rate. Thus, the individual gets to choose their potentialrates of return and sees what happens to the numbers.

Example IV

As mentioned before, retirees can use the financial management tool tocalculate the cost going forward into retirement. One of the criticalelements is determining an individual's life span. This becomesproblematic with age. A healthy 40 year old has a very specific lifespan whereas a healthy 68 year old life span will be significantlylonger than a healthy 40 year old, the extent to which is difficult tojudge. Thus, a person that is 68 would need to know their likelihood ofliving past 80 or 90 and what their health care expenses will look like.

Example V

Retirees generally operate on a budget and must know what the impacttheir medical cost will have on their budget. Once this calculation isdone the question then becomes how long will their money last.

For instance, if the individual is spending between $3,000 and $4,000 ayear on vacations that they were hoping to do on an annual basis untilthey are 75, they may be persuaded by the subject calculations to altertheir spending habits. In order to inform the individual, one first hasto calculate their health care expenses. Then one has to provide abudget in today's dollars.

For instance if the budget is $30,000 a year for medical expenses, bythe end of a 15 year period in which a 3% inflation rate is constant,medical expenses may be over $60,000 a year. It is important forindividuals to know these numbers when establishing their budget and thesubject tool in determining these adjusted costs. The next budget stepis income sources. Assuming that one has a half a million dollars insavings, is going to generate $24,000 out of social security, has asmall pension, and could potentially sell his or her house, the subjecttool can calculate a distribution analysis on a year by year basis toshow how ones assets are dwindling and when they will run out. If oneknows that one is going to be living in retirement for 30 years onecould be out of money in 20 years. Thus creating a budget that takesinto account the health care costs is an exceedingly useful function forthe subject tool.

Example VI

As mentioned above, firms with over 100,000 employees are self-insured.The question of raises for employees presents certain problems. Forinstance, one needs to know whether to give an employee a 5% raise andhow much the raise is really worth. With the financial management toolthe company can quickly plug in a 7% increase in health costs so that inthis scenario the employee is being given a 12% raise.

Example VII

The financial management tool provides realistic numbers based on apersons health history and other actuarial characteristics and providesdisease management and wellness advice. As mentioned above, if anemployee can better manage their health care then cost savings can besignificantly augmented. For instance, if an individual knows his ageand health status, the financial management tool can output the lifespan of the individual. It is then possible to calculate the annual costof health care because the company knows what portion the individualpays for and what portion the company covers. For example, if theindividual does not follow a doctor's prescribed plan, instead of livingto 78, the life span could be 67. There are associated annual costs forhealth care for the individual between the present time and age 67which, for instance, may be different than the annual cost between thepresent time and 78. With successful coaching information can beprovided to the employee as an incentive to take the right action.

For instance, if the individual has type 2 diabetes and does not takecare of his condition he may die by the time he is 67 years old. If hetakes care of himself properly he may live to 78. Calculations from thecalculator may indicate that he will be spending $800 a year if he takescare of himself, whereas he may be spending $1,400 if he does not takecare of his condition.

What is now presented are a series of flow charts to indicate how thesubject calculator operates.

Referring now to FIGS. 9A-9E, the process used by the financialmanagement tool starts with a questionnaire 100 which poses genericquestions 102, namely questions such as current age, marital status,race, height, weight, ph, whether you have had physical exam by a doctorin the past 12 months, whether you have had a colonoscopy, how often youare exposed to second-hand smoke, do you have two or more servings ofalcohol in a typical day, your level of physical activity, and youreating habits The output of the generic questions is applied to adecision block 104 which then takes the individuals gender into account.If male, then the question is asked as illustrated at 106 “is your waistcircumference over 40 inches”, or “have you had a PSA test”. If female,at 108 the question is asked “have you had a baby weighing more than 9pounds at birth”, “is your waist circumference over 35 inches” and “haveyou had a mammogram”.

The results are passed to a decision block 110 which poses the question“have you ever smoked cigars, cigarettes or a pipe.” If no, then theanswer is passed to decision block 112. If yes then as shown at decisionblock 114 the question is posed “do you currently smoke”. If no, thequestion is asked as illustrated at 116 “how many years ago did you quitsmoking”. If the answer is yes, the question posed at 118 is “how manycigarettes do you smoke per day and how many years have you beensmoking.”

The results of the outputs of blocks 116 and 118 are also applied todecision block 112 which asks the question “are you presently retired.”If the answer is no, then as illustrated at 120 a query is asked as to“what age do you plan to retire.” If yes, then the retirement age is setto ones current age as illustrated at 122.

The results are passed' to block 124, which poses the question “have youbeen told that you have high blood pressure yes or no.” If yes, then asillustrated by block 126 the question is posed “do you know your bloodpressure.” If yes, the question is posed at 128 to provide your systolicblood pressure and your diastolic blood pressure.

The outputs of these blocks are passed to a block 130 to ascertain ifyou have been told that you have high cholesterol, yes or no. The resultis passed to decision block 132 which asks the question “do you knowyour cholesterol levels.” If yes, the question asked at 134 as to whatyour total cholesterol is and your HDL cholesterol level.

The outputs of these blocks are both sent block 136 which asks thequestions relating to disease, namely “have you been diagnosed withcancer yes or no”, “do you have cardiovascular disease, yes or no”,“have you been told that you have cardiovascular disease which includesdiseases that affect the heart (cardio) or blood vessels (vascular) yesor no.” Also a question is posed “has a blood relative either parent orsibling had a heart attack when he or she was under the age of 65.”Again an answer yes or no is recorded. Finally the question is asked“have you been diagnosed with type 2 diabetes yes or no”, or “do youhave a blood relative, parent or sibling that has been diagnosed withtype 2 diabetes yes or no.” The results are passed to a module 140 thatruns financial scenarios at 140 which employs system calculations 142.These calculations include for instance life expectancy, retirementperiod in terms of life expectancy minus retirement age, years toretirement, i.e. retirement age minus current age, disease state basedon questions relating to cardiovascular disease, cancer, type 2diabetes, high cholesterol, tobacco usage, blood pressure and generalhealth. The system calculations as illustrated at 144 result in acalculation of medical costs in the retirement period based on the rateof return before retirement, the rate of return during retirement, yearsto retirement, and years in retirement.

The output of the system calculations 144 is reflected in a financialworksheet 146 in which the system uses the basic health profile from thequestionnaire to indicate current age, gender and disease state asillustrated at 146.

From this financial worksheet one ascertains retirement age asillustrated at 146, expected life expectancy 148 and the expected rateof return before retirement at 150, the outputs of which are referred toa calculator that calculates medical costs as illustrated at 152, whichin turn is reflected in the expected rate of return during retirement asillustrated at 154. The calculated medical costs are then inputted to amodule 156 that, calculates monthly investment 158, monthlycontributions 160 and the initial investment 162. Finally at 170 afinancial scenario report is output which provides a number of differentfinancial scenarios based on a number of different variables, all ofwhich are viewed at 172.

Calculating Healthcare Expense

After the HealthView questionnaire is completed the system determineshealth status and calculates life expectancy based on Current Age,Gender and Disease state. The information is saved in a database andused in calculating detailed healthcare costs.

The financial management tool utilizes stored procedures to calculatethe medical costs that are required in retirement from actuary tables.

The stored procedure Input parameters are:

-   -   Client        -   Current Age        -   Gender        -   Disease State        -   Expected Life Expectancy        -   Retirement Age    -   Spouse (if spouse information collected)        -   Current Age        -   Gender        -   Disease State        -   Expected Life Expectancy        -   Retirement Age    -   Rate of Return before Retirement    -   Rate of Return during Retirement    -   Flag to determine if calculation should be at Net Present Value        or at Pesent Value as of Retirement Year

The stored procedure returns a data set that is comprised of multipledata tables.

These data tables are used to populate graphs, charts and grids on thereports and forms.

Processing Steps

The stored procedure performs the following steps:

Get information from Actuary tables to a local data table based on inputparameters from retirement age to 100 for client and spouse; the datatable being populated with:

-   -   ItemRetId    -   ClientID—Client or spouse    -   DiseaseState    -   Gender—M/F    -   Current Age    -   Calculated Year    -   LifeExpectancy    -   AttainedAge    -   Total out-of-pocket expenses    -   Hearing    -   Vision    -   Premuims    -   Dental    -   TotalCost    -   Adjusted out-of-pocket expenses    -   Adjusted Premuims    -   Adjusted Dental    -   Adjusted Total Cost    -   Healthcare Cost in Retirement    -   HealthcareCost During Retirement

Set ItemRetId as a difference between attained age and retirement age

Calculate adjusted costs to Present Value as of Retirement year forclient and spouse using:

-   -   HealthcareCostinRetirement    -   AdjustedPremuims    -   AdjustedDental    -   AdjustedTotalCost

Calculate total costs as of Retirement year for client and spouse basedon the retirement period (retirement age to expected Life expectancy)

Calculate time to horizon (Retirement age—current age) and calculateinvestment Required at Net Present Value

Determine the joint retirement period Lowest retirement age to largestlife expectancy and determine the three cut-off groups based on theearliest retirement of the two and oldest life expectancy using datarelated to:

-   -   Client    -   Spouse and Client    -   Spouse

Or:

-   -   Spouse    -   Spouse and Client    -   Client

Calculate Total Costs for Client and Spouse in Retirement Periods

Create Output data table that includes annual costs for premiums,out-of-pocket expenses, dental, hearing, vision and total costs forclient, spouse and Total for both. Create Output data table thatincludes annual costs, and average costs at a selected interval duringretirement period (default every 5 years) for client, spouse and forboth The table includes premiums, dental and out-of-pocket expenses,hearing and vision

Create Output Data Table for Client and Spouse That Displays

-   -   Retirement category        -   Retirement        -   at retirement year        -   during retirement    -   Initial investment    -   Period—number of years    -   Slope (%)

The information from the tables provides estimated projected costsclosest to actuary tables for graphs and planning tools.

Create an output table with all data collected and processed from thecurrent age to 100 to allow use of the raw data in calculating what ifscenario, update grids, charts and graph.

Create a Summery Output Table of Cost Required for Client and Spouse

The source code for the financial management tool is attached as anappendix hereto.

Actual Claims, Actual Cost Database

As stated hereinbefore it has been found that the accuracy of thefinancial predictions of the subject financial management tool can beimmeasurably improved utilizing actual claims data and actual cost datafor these claims.

Referring now to FIG. 10, the financial tool of FIG. 1 is replicated,with items carrying like reference characters.

Added as an overlay to the system of FIG. 1, as shown in FIG. 10 anactual claims and actual costs database 200 is utilized to develop abase amount for a given illness or disease based on the state ofretirement for the particular individual as input in terms of specificclient data 202. This base amount here indicated, by arrow 204, iscoupled to the calculated healthcare expense module 12, along withadjustment factor data 206 from database 200. This adjusted factoreddata is applied to a cost adjustment factor module 208 which in oneembodiment adjusts the base amount output from database 200 for instanceby years since the disease was diagnosed, the disease management regime,the age, and the gender of the client as well as certain trends. All ofthese factors are combined as an adjustment factor to the base amountfrom database 200.

Referring now to FIG. 11, the databases utilized in the subjectinvention include for instance a U.S. database of over 50 million healthinsurance claims records and costs. This large sample, illustrated at210, is a large sample of individual claims arranged according to stateand disease level which for instance produces a base cost 212, in oneembodiment for instance $294.29. Database no is also queried as to theindividual profile entered into the front end of the system which itemsdetermine which factors need to be adjusted from the base cost.

In one embodiment as illustrated 214 these items involve an adjustmentfactor for age, gender, current age, projected age, disease managementregime, and years since diagnosis. These items are then provided asinputs to algorithms that reside in the subject system, namelyalgorithms 216, which for instance produce in one embodiment an adjustedcost for hospital care in the amount of $18,232.00 in an example to bedescribed in FIG. 12. Note that items 214 are stored in cost adjustmentmodule 208 of FIG. 10 and include for instance how the disease ismanaged, costs in the last two years of life, long term costs, annualupdates to projections based on cost trends, regular updates from theAffordable Care Act and other factors. It is these factors which drivealgorithms 216 such that given a base cost of $294.29 the adjusted costnumber in one example for instance of a poorly managed health regime is$18,232.00.

How these adjustments are applied is shown in the table of FIG. 12. Herethe information is for a 45 year old male in Alabama with poorly manageddiabetes. The information in the table of FIG. 12 shows how the basecost estimate of $294.29 is adjusted for the profile of the individualfor a 21 year projection to 2033, age, gender, disease management andyears since diagnosis to produce a total out-of-pocket hospital cost of$18,232.43 in 2033.

It will be seen that the $18,232.43 cost relates to the hospital costsfor an individual age 65 in the year 2033 which is derived as follows.The base amount for the hypothetical 45 year old male is $294.29 basedon a diabetes type II managed poorly scenario. This cost is derived fromdatabase 200 and utilizes actual claims and actual cost data.

It is noted that in this case that the disease was diagnosed less than ayear ago. This number is trended forward 21 years at a rate of 7% toyield a cost of $1,218.52. Thereafter one applies and age/gender factorof 971.610% to yield a hospital cost of $11,839.24. Following this isapplied a disease management factor for the poorly managed scenarionoted of 154.000% which yields a hospital cost of $18,232.43. It isnoted that this is one of the costs associated with healthcare in aperson's retirement based on a 21 year projection.

From what has been presented the creation of adjustment factors for thebase cost involves a full set of base cost data tables and adjustmentfactors created for each of the cost items shown across the top of thetable in Example 1, namely medical premium individual, Rx premiumindividual, medical premium employee base, Rx premium employee base,dental premium, hospital out-of-pocked (OOP) costs, doctor and tests OOPcosts, Rx OOP costs, dental OOP costs, hearing OOP costs, vision OOPcosts and others using the actual claims data records and costsavailable in database 200.

As to the base cost data the table shown below is only for hospital OOPcosts. The base data for the hospital OOP costs are taken directly fromthe claims database for each state and chronic disease condition. Thesecosts are shown below.

Costs for 2013 High Blood State Pressure High Cholesterol Diabetes AL$200.44 $144.03 $294.29 AK $340.25 $244.60 $499.68 AZ $232.80 $167.44$342.04 AR $167.16 $120.26 $245.59

Note in one embodiment rather than creating a similar table for everypossible characteristic or combination of characteristics in a patient'sprofile such as current age, gender, life expectancy and income and forevery possible year that the individual ages into through retirement,the database creates a set of adjustment factors. This constitutes athinner set of adjustment factor formulas which allows the subjectsystem to contain significant less raw data and thus decrease the timein which a cost estimate can be produced.

Once an individual's profile information has been input, the adjustmentfactors are applied to the base cost data to appropriately reflectcorrect costs for that particular individual.

It is noted that the adjustment factors are also derived directly fromthe claims database and are stored as a separate file. Every time thesystem is updated with any particular type of legislative, cost trend orother changes, both the database table files and the adjustment factorfiles are imported into the subject system.

The adjustment factor file is created from the original claims data fileas follows.

First a statistical software program such as SAS or SPSS is run on theclaims database. This program compares the cost data in each of thecolumns of actual cost data as illustrated below and creates anadjustment factor. This can be seen below.

Actual Hospital OOP Costs From Claims Data for Each Defined Group ofClaimants Well- Poorly- Diabetes Managed Managed Diabetes Patient CostsDiabetes Diabetes Diabetes Patient Increase Patient Costs Patient CostsPatient Costs Costs Over Base in for Male, 65 yrs. for Males, 65 yrs.for Males, 65 yrs. in 2013 5 Years (to old in old in old in State (BaseCosts) 2018) 2018 2018 2018 AL $294.29 $1218.52 $11,839.24 $8879.43$18,232.40 AK $499.68 $2068.98 $20,102.38 $15,076.79 $30,967.37 AZ$342.04 $1,416.25 $13,760.44 $10,320.33 $21,191.08 AR $245.59 $1016.90$9,880.29 $7,410.22 $15,215.65

The data in these columns to predict future costs come from predictiveor prognostication algorithms that take the actual historical base costdata and compare it to for instance the prior 10 years history of costincreases to accurately predict trends.

From the above, the following are the cost adjustment factors:

Adjustment Factors Diabetes Cost Cost Patient Adjustment AdjustmentCosts Factor For 5 Factor for Well- in 2013 Year Cost Male 65 ManagedPoorly (Base Increase by Years Old in Disease Cost Managed State Costs)2018 2018 Adjustment Disease AL $294.29 414.06% 971.61% 75.0% 154.0% AK$499.68 414.06% 971.61% 75.0% 154.0% AZ $342.04 414.06% 971.61% 75.0%154.0% AR $245.59 414.06% 971.61% 75.0% 154.0%

As can be seen the adjustment factors are compiled utilizing actualcosts and projected increases in cost as the year's progress.

Next using a statistical methodology known as analysis of variance orANOVA, the adjustment factors tested for statistical accuracy andreliability. This test typically requires a very large number of claimsin each of the above columns for instance a minimum of over 2,000claims, in order to be statistically reliable. Only the adjustmentfactors which were statistically reliable will be saved in costadjustment factor module 208 of FIG. 10.

What will be seen is that actual claims data and actual costs ofresolving the actual claims are used both for the base number for aparticular state and disease, as well as in formulating the adjustmentfactors which are used to adjust the base cost. As a result a financialmanagement tool which utilizes both the actual claims and actual costsinvolved resolving the claims results in a highly sophisticatedextremely accurate predictor of healthcare costs in the retirement ofthe client.

While the present invention has been described in connection with thepreferred embodiments of the various figures, it is to be understoodthat other similar embodiments may be used or modifications or additionsmay be made to the described embodiment for performing the same functionof the present invention without deviating therefrom. Therefore, thepresent invention should not be limited to any single embodiment, butrather construed in breadth and scope in accordance with the recitationof the appended claims.

What is claimed is:
 1. A financial planning system adapted to be used bya client for calculating costs in retirement in which said systemincorporates calculated healthcare expenses, comprising: a financialmanagement tool; a calculated healthcare expense module for providingcalculated healthcare expense costs as an input to said financialmanagement tool; a cost adjustment factor unit coupled to saidcalculated healthcare expense module; and, a database containing actualclaims and actual cost data for resolving the claims, said databaseproviding a base cost amount to said calculated healthcare expensemodule in accordance with the state of retirement for said client and anidentification of a client's disease, said database also providingadjustment factor data derived from said actual claims and actual costdata to said cost adjustment factor unit, said cost adjustment factorunit being coupled to said calculated healthcare expense module foradjusting said base cost amount, whereby said calculated healthcareexpense is a function of actual claims and the actual cost for resolvingsaid claims.
 2. The system of claim 1, wherein said cost adjustmentfactors include at least one of years since said disease was diagnosed,disease management regime, age of said client, gender of said client andcost trends.
 3. The system of claim 2, wherein said database iscomprised of a large sample of individual claims categorized at a stateand disease level.
 4. The system of claim 3, wherein said calculatedhealthcare expense includes categories including at least one ofindividual medical expense, individual prescription expense, employerbased medical expense, employer based prescription expense, dentalexpense, all hearing expenses, vision expenses, professional physicianand test expense relating to in hospital expense, in hospitalprescription expense and in hospital dental expense.
 5. The system ofclaim 4, wherein said categories of expenses are arranged by presentclient age, projected client retirement age, and client age atpredetermined number of years after retirement age corresponding tomortality from said disease.
 6. The system of claim 5, and furtherincluding categorizing said costs against a second mortality date.
 7. Asystem for calculating retirement costs, comprising a financialmanagement tool having calculations based on historical actual claimsmade against an insurance company and actual costs of resolving saidclaims by said insurance company.
 8. The system of claim 7, and furtherincluding a module for adjusting said retirement costs based on saidhistorical actual claims and actual costs thereof.
 9. The system ofclaim 8, wherein said adjustment includes adjustment factors includingat least one of years since a disease is diagnosed, disease managementregime, age of an individual, gender of an individual and cost trends.10. The system of claim 7, and further including inputting into saidfinancial management tool a projected retirement date.
 11. The system ofclaim 10, and further including inputting to said financial managementtool health based life expectancy.
 12. The system of claim 11, andfurther including supplying a financial management input to saidfinancial management tool.
 13. The system of claim 12, wherein saidfinancial planning input includes one of expected state of residenceduring retirement, expected income in retirement, current savings,current rate of returns and future rates of returns.
 14. The system ofclaim 7, wherein said financial management tool is coupled by a serverto the internet and wherein the results of the financial management toolare displayed.
 15. The system of claim 14, wherein the informationdisplayed on said display is the age of said client, the age said clientplans to retire, the client's life expectancy, the healthcare inflationrate, the expected rate of return before retirement, the expected rateof return during retirement and the savings needed to cover the client'smedical expenses in retirement.
 16. The system of claim 14, wherein saiddisplay includes the savings needed to cover out-of-pocket medicalexpenses in retirement.
 17. The system of claim 7, wherein saidfinancial management tool includes a health risk analysis moduleincluding a health profile, a health risk score and a calculator offinancial implications.
 18. The system of claim 17, wherein saidfinancial implications include out-of-pocket expenses, currentretirement plan income, future income, current age, retirement age, lifeexpectancy, healthcare inflation rate, expected rate of return beforeretirement, expected rate of return during retirement, savings needed tocover out-of-pocket costs during retirement, state of residency andexpected income in retirement.